Monday, March 18, 2013

Whether or not someone should attend college continues to be a hot topic of discussion. While some opportunities are closed to those who have not completed a four-year degree, there are many individuals (NBC's Brian Williams & Facebook CEO Mark Zuckerberg come to mind) who are immensely successful despite not completing college. A few weeks ago I posted an article by Forbes contributor John Tamny where he said, among other things, that "college doesn't make you smart or hard working as much as smart and hard working people often go to college." While he says no job requires a college degree, and I think he's on to something here, the fact remains that many employers require it.

This morning I happened upon another article from Onlineuniversities.com that gave me pause while researching information regarding college savings. The article gives 10 reasons not to save for your child's college expenses, and they should be considered. Among them, the reality that not all parents can afford to set aside this money, and that one's retirement should not be jeopardized to pay college tuition. Investigating college savings plans, and student loans policies and procedures well in advance will better prepare you and your student should s/he decide higher education is right for them.

The best way to reduce the cost of higher education is through scholarships. These could be scholarships separate from the college or university, or directly from the school via merit (academic) or athletic scholarships. Doing well in high school is worth big bucks. Not only will this alleviate the burden parents face, but the student will be in a better position to save income post-graduation.

In addition to academic or athletic "full-ride" scholarships (which sometimes only cover tuition, not room & board), schools often offer lower scholarships which can be just as competitive. This is where student loans become necessary. If your student will need some additional funding, the federal government offers student loans, which are always preferable to private loans, due to their flexible repayment options and lower interest rates. Click the highlighted link above for more information. Each year, your family's financial need will be calculated using the Federal Application for Federal Student Aid (FAFSA), which you or your student completes online. It is not unusual for a tax return to be requested to verify information you provided. Depending on your financial need, you will qualify for either subsidized (the interest is deferred until graduation), or unsubsidized (interest is not deferred) loans, or both. These are the federal borrowing limits for traditional undergraduate students:

1st Year: $5,500

2nd Year: $6,500

3rd & 4th Year: $7,500

Student must be considered dependents to borrow these amounts, and might qualify for additional money if their parents are not qualified for Parent PLUS Loans. Notice that these loans cover only $27,000 of the total 2 or 4 year cost. For some perspective on this amount, consider that two semesters (one full year) for an in-state student at Michigan State University is currently $21,200. While tuition will surely rise over time, a college savings plan can help pay for school after federal student loan options are exhausted.

The Financial Industry Regulatory Authority (FINRA) has a great deal of impartial information about college savings plans, and should be used when considering your options. The "Smart Saving" link above it a portal into the college savings information available from FINRA. Be sure to click on the college savings plan comparison chart, for a quick summary, and read FINRA's tips when browsing your options. Types of college savings plans include:

Please take advantage of all the information freely available as you prepare for the future. FINRA's site is easy to navigate and full of financial information of all kinds. With some hard studying on the student's part, and armed with quality information, college can be a manageable financial obstacle.

Wednesday, March 13, 2013

In this first post in a series discussing the many financial tools freely available, I want to focus on two simple online resources which will better prepare you for your next loan. Most of us have loans of some sort: car loans, mortgages, student loans, and the most expensive of loans, credit card balances. But, before you walk into a lending institution you can do some homework and have a good idea a) how much you need to save in advance of the loan, possibly to lower your payment, and b) your desired loan duration based on the monthly payment the bank or credit union will expect.

Now, it is certainly true that not everything will be under your control during the process, but at the very least, you will go into the meeting with reasonable expectations. While a loan with a longer duration might seem more affordable in the short term (lower monthly payment), it is in fact more expensive, as more interest will accrue as time passes. However, an exception of this is interest-free financing (remember all the auto dealer commercials...), and if it corresponds with a need you have, is certainly a great way to save money.

Both of these highlighted resources are provided by FINRA, the Financial Industry Regulatory Authority, a company you've probably never heard of, but is responsible for the monitoring of financial institutions across the country. Click the "Savings Calculator" link above to give it a try, a screenshot of it appears below.

This calculator can be used to plan toward a savings goal, whether it be for your next car, home improvement project, or family vacation. I have imputed a $500 monthly savings goal with a starting amount of only $1,000. You can see that in three short years of consistent saving you can easily save the recommended 3-6 month emergency fund, depending on your income, or have a significant down-payment for your next loan. This is a great motivational tool!

The second of these resources is the loan calculator. Say you need a new car, and it costs around $25,000. You've been diligently saving and intend to pay $10,000 of it in cash to lower your monthly payment. The Loan Calculator can be used to determine exactly how much you can afford to finance, by way of the ultimate monthly cost of the loan.

I researched a local credit union's best interest rate for an auto loan and inserted that information and the loan amount into the calculator. How long do you want to pay for your car? This might be determined by the monthly payment, so you can try several different loan terms. I settled with an manageable payment just over $300/month over 4 years for this example.

This could also be a great learning tool for children and teens, too. Please pass along this information to others who might find it useful, financial literacy is too important for us to neglect!

Tuesday, March 12, 2013

Over the next several weeks, in preparation for Money Smart Week, a financial literacy program sponsored by the Federal Reserve Bank of Chicago and the American Library Association, I will be highlighting some of the financial, investment, and career resources the GDL Business Center offers and how it can better your financial future. Financial Literacy is a basic life skill, and yet even the most basic information can be difficult to find among the legions of results in an online search. We want you to be successful, so please return often and take advantage of the (free!) resources at your disposal.

Look for 1-2 posts a week, each spotlighting a resource, online database, or tool that you can immediately put into practice.

Monday, March 11, 2013

Our seminar with the Flint office of GreenPath Debt Solutions has been rescheduled!

Date: Thursday, April 18

Time: 6:00 - 7:00 PM

Location: Grand Blanc - McFarlen Branch

515 Perry Road

These debt experts will be discussing why your credit score is important to watch, and how to interpret your score when you request a copy. Please bring your questions, there will be time for a Q & A session at the end of the presentation. Click HEREto make a reservation.

Friday, March 1, 2013

As part of their ongoing speaker series, the Genesee County Bar Association will conduct an informational seminar here at the library regarding estate planning, wills, trusts, and the death of a loved one. While this can be a difficult issue to discuss with friends and family, it is nonetheless important to have your wishes known.

Please take advantage of this free opportunity to speak with an attorney.